The FOMC may have left rates unchanged, as expected, but they reduced their estimate for economic growth from an already modest 2.1% down to 1.7%. At the same time, they raised their inflation expectations from 2.5% to 2.7%, describing progress bringing down inflation as “delayed.” Slowing economic growth and rising inflation expectations aren’t a good recipe, so some may wonder why equity markets rallied on the news - 65 basis points between 2 PM Eastern and the market close, particularly as 16 of 19 respondents reported higher uncertainty - attributed to the tariffs and government spending cuts.
